Indian shares surged on Tuesday as consumer goods and rate-sensitive stocks flared on the government's rural economy push in the Union Budget and expectations of an interest rate cut.

While the Budget, announced on Monday, lacked big moves for corporate India, it laid a significant focus on the rural economy. Besides being a big vote bank, rural consumers also happen to be the largest base for FMCG firms in the country.

The benchmark 30-stock BSE Sensex gained 3.38 per cent to close at 23,779.35 with the BSE FMCG index soaring 4.9 per cent, the most among all sectoral indices.

ITC, India’s biggest cigarette maker, jumped almost 10 per cent. The company, which is fast becoming one of the biggest FMCG companies in the country by revenue, was boosted partly by a less-than-expected hike in excise duty on tobacco products. ITC is the most valued consumer goods company in India and has the highest weight in the Sensex.

Like its FMCG peers, ITC also gained on expectations that efforts to boost rural income and a likely bumper crop this year will leave more money in the hand of consumers in the hinterland.

Rate-sensitive stocks gained after finance minister Arun Jaitley on Monday retained the fiscal deficit target for 2016-17 at 3.5 per cent of gross domestic product. This came as a surprise as many economists had expected him to relax the target while pump-priming the economy with public expenditure.

However, Jaitley stuck to the fiscal consolidation plan, maintaining the credibility of the government's official target. The government has already been facing the heat over its inability to revive growth in line with its own goal, and revision in the deficit target would have compounded its problems.

India’s GDP growth for 2015-16 is expected to be 7.6 per cent as against the government's year-ago projection of 8-8.5 per cent. The industrial sector is also yet to see any concrete revival while the agriculture sector was battered by a second successive year of poor monsoon, which irrigates much of Indian crops.

On the flip side, with inflation still in a comfortable zone, all eyes are set on the Reserve Bank of India to cut rates to spur corporate investments as well as demand for big-ticket products that are swayed by lending rates--namely automobiles and housing. The realty and auto indices rose faster than the Sensex.

The RBI, which is to meet for its next bimonthly monetary policy review on April 5, is expected to take cognizance of the government's intention to stick to the fiscal stability path and snip its main lending rate.

In its last policy review meet on February 2, the RBI had left the repo rate unchanged at 6.75 per cent and put the onus of future rate cuts on the Budget and inflation.

Meanwhile, Indian markets were also tracking positive cues from other Asia-Pacific markets despite poor economic data from China followed by a stimulus package announced by Beijing.